I make no bones about it -- I consider Discovery Holding Co. (NASDAQ:DISCA) to be a complicated entity to ponder, a stock that I wouldn't touch with a 10-foot pole. (That's not a value judgment, just the Foolish point that it's logical to focus on stocks one understands, and I find Discovery Holding's structure confusing.) However, there are interesting elements surrounding the release of Discovery Holding's latest quarterly results.

As background, Discovery Holding was spun off from Liberty Media (NASDAQ:LINTA) (NASDAQ:LINTB) in July 2005. Discovery Holding consists of 100% ownership in operating entity Ascent Media, a 100% ownership interest in Ascent Health, and until recently, a 50% ownership interest in Discovery Communications (which is the segment that most of us are most familiar with, as it has cable programming properties such as the obvious Discovery Channel, as well as TLC, Animal Planet, BBC America, and more).

If you have any interest at all in this stock, you know that until recently, Discovery Holding shared ownership of Discovery Communications with Cox Communications and Advance/Newhouse. Discovery Holding had 50% while the other two companies split the remaining 50%. The recent big news was Discovery Communications' plan to buy Cox's 25% stake with $1.3 billion in cash as well as throwing in Travel Channel-related properties. Going forward, Discovery Communications will have two stakeholders of Discovery Holding and Advance/Newhouse, who retain ownership with two-thirds and one-third, respectively.

There is a lot of speculation brewing as to whether Advance/Newhouse can be coerced into selling its chunk as well.

First-quarter "comprehensive" earnings at Discovery Holding increased 48% to $22.3 million, or $0.07 per share. This includes $21.6 million related to Discovery Holding's then-50% share in Discovery Communications. Furthermore, Discovery Holding's consolidated revenue increased by 13%. Taking a peek at operating income, one might notice that Discovery Holding reported a loss of $1 million in the quarter, but Discovery Communications' total operating income was $122 million.  

The biggest element here, of course, seems to surround the fact that Discovery Holding is increasing its stake in Discovery Communications. It's easy to see that owning more of Discovery Communications should be a boon to Discovery Holding.  

For further insight into this complex investment, look no further than Motley Fool Inside Value. Jim Cramer may have recently lauded Discovery Holding on his show, but longtime Fool Bill Mann recommended Discovery Holding in October 2005 as a guest analyst for Inside Value, and subscribers who bought at that time have experienced more than 50% share price appreciation.

Working up a valuation for this entity is a complicated procedure, but the smart folks on the Discovery Holding discussion board at The Motley Fool recently did some valuation work -- and drummed up related discussion -- inspired by the transaction with Cox. (Take a 30-day free trial to take a look, and get in on the discussion.) However, complicated or not, it seems that Discovery Holding is going to have an interesting year as the strengths of the entity may come a bit clearer to potential investors.        

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Discovery Holding is a Motley Fool Inside Value recommendation. To find out what other companies have been recommended for the service, click here for a 30-day free trial.

You guessed it, Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy that is not at all complicated.